Forecasting is crucial to any business, especially in an uncertain economy. So here's some expert tips on doing it right - accurately & effectively.
1. Don't ignore it
Forecasting can easily become something you put-off, or not even do at all. In an unstable economic environment, it may seem easier to just keep floating along, but that takes up a lot of energy.
However, it is critical to know what's coming around the next bend in the river.. A lack of a cashflow forecast is a recipe for disaster – regardless of the long-term projects, they mean nothing on the day the business runs out of cash.
2. Get a handle on what you're doing
Lets begin with the basics: Having a business plan is common sense but, does your company or idea even make sense? Have your found your "sweet spot" in the market place? Forecasting is all about how to deal with cashflow, you may see the zeros in your bank account and think "Hey we are A-OK", but if you take into account the plans are never static, suddenly your cash balance begins to look a heck of a lot worse. All these factors and more need to be accounted for in the business forecast.
3. Understand your audience
While forecasting should be a standardized business practice, sometimes it is also necessary for specific reasons - such as gaining backing from a bank or from outside investors. The underlying process of business forecasting is always the same, but the communication needs to be different depending on your audience.
4. Know your target market
Business forecasting is not solely based on your businesses performance, or predicted performance, but on the market in which you operate. You need to know your customers and competition, inside out and backwards. Knowing your target audience will give you a clear vision of how to expect the market will operate and develop... this takes extensive research, planning, and financial forecasting.
5. Be flexible
While forecasting can be difficult even in the best-of-times, these are currently not the best-of-times for businesses. Your business processes are always in a constant state of change to keep up with ever changing economic environment and project requirements. That’s why you need to be flexible have the ability to change, and adjust your business forecast without breaking the bank.